The company is not executing the receivables efficiently as indicated by debt turnover ratio which has been constant in the range of Having scrutinized these figures, it is clear to see a slight inclination in sales generated from assets for Debt to asset ratio This is a metric used to determine the financial risk of a company by calculation the quantity of the assets by the company that has been utilised to finance debt Beyer, In the following exhibits are the vertical and horizontal analyses for Tesco plc.
In addition, financial ratio analysis is always subject to estimates and assumptions, thus, might not reflect the actual status or figures of the company.
InSainsbury's posted increase gearing ratio and interest cover than in ; this is combined with the fact that Sainsbury's have posted stable figures in its gearing for the past years. This erroneous and inefficient type of costing will cause miscalculation of the true manufacturing overhead cost of a product.
There are possible reasons that might have contributed to this observation in the trend of current ratio for the last three years.
As discussed in the business valuation literature Palepu,there is empirical evidence that ROCE is affected by market forces and mean reverts in long-term and for mature companies. Appendix A gives the checklist for the below.
Moreover, the financial services offered by the company have had a strong influence on the profitability of the company in the food retail industry.
Again, Tesco Plc will be the favoured choice due to its exposure to non-food business as well as international operations, which have potential to drive future sales.